U.S. is coming around to the logic of private-sector investment

Our roads and bridges are crumbling. Just ask the American Society of Civil Engineers, the professional association that tracks their quality from year to year.

Just to bring our roads up to passable levels, we need to spend $94 billion per year. Our bridges need another $9.4 billion per year. That investment is larger than the total manufacturing output of every state in the U.S. except California.

And we’re not even counting what it would take to add enough capacity to eliminate congestion and bottlenecks that easily heap on another $60 billion in economic costs each year according to researchers at Texas A&M University.

Unfortunately, our national leaders seem to be burying their heads in the sand. The U.S. Congress throws billions of dollars at politically attractive but ineffective “pork-barrel” projects each year. Take the now infamous “Bridge to Nowhere”: Congress allocated $200 million to build a bridge between two islands in Alaska that would serve just 50 people.

“Despite pork-laden bills like the recent $284 billion transportation bill,” warns Felix Rohatyn, a New York-based financial advisory who helped bring New York City from the cusp of bankruptcy in the 1970s, “our national infrastructure has been badly neglected over the years.”

One of the more thoughtful solutions proposed by Mr. Rohatyn and former Senator Warren Rudman is a call to create a National Infrastructure Corporation. Congress, they believe, should establish a federal agency with the responsibility of funding new investments in roads, highways, sewers, water systems, and school buildings.

The appeal is hard to ignore. It speaks to an obvious need. It also harkens nostalgically to time when the federal government committed itself to a multi-decade spending binge that added tens of thousands of miles of highways, built hundreds of bridges, and funded hundreds of municipal water and sewer systems.

The problem with their proposal is the fact it is grounded in the past. It places the federal government at the center of the solution. We need to be looking at 21st century solutions to narrowing our infrastructure gap. Different times call for different measures.

Modern examples from abroad are showing time and time again that major road and highway projects can be initiated, completed, and operated faster and more efficiently using the private sector.

The French government just completed the sale of its controlling interest in the nation’s toll roads, letting the private sector run, operate, and finance them on its own. The initiative also generated cash – $17.8 billion for the government.

The Sydney-based Macquarie Infrastructure Group has become the world’s largest operator of toll roads (including the M6 in England) because of its successful ventures in building and operating new roads profitably in Australia.

The U.S. is coming around to the logic of private-sector investment more slowly. But it’s coming.

Last year, Illinois negotiated a $1.8 billion agreement with Macquarie to renovate and operate the Chicago Skyway using toll revenues to finance the project. In Texas, legislation is paving the way for major congestion-reducing upgrades in every major metropolitan area using the private sector. In Washington state, toll revenues are financing the construction and operation of critical bridges.

By allowing the private sector to become more involved in the design, construction, and operation of new roads, bridges, dams, and other infrastructure, we can begin meeting our nation’s infrastructure needs logically and rationally.

A federally backed National Infrastructure Corporation, on the other hand, is likely to create as another unnecessary bureaucracy, particularly if it places federal control at the center of U.S. infrastructure needs.

We have the technology and funding (through private capital markets) to make dramatic inroads into solving our infrastructure crisis without putting taxpayer dollars at risk. The solution is not giving the federal government a bigger role. Rather, it’s unleashing the power of the private sector and capital markets to bring the latest technology to bear on solving an economic problem. In many cases, this simply means getting out of the way of good ideas.

Samuel Staley is director of urban and land use policy at Reason Foundation.

Samuel R. Staley, Ph.D. is a senior research fellow at Reason Foundation and managing director of the DeVoe L. Moore Center at Florida State University in Tallahassee where he teaches graduate and undergraduate courses in urban planning, regulation, and urban economics. Prior to joining Florida State, Staley was director of urban growth and land-use policy for Reason Foundation where he helped establish its urban policy program in 1997.

Express bus service combined with variable pricing in a new policy framework aimed at achieving significant, sustainable reductions in congestion in both the general lanes and the inside-shoulder lane.